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Delinquent taxes: partial payment installment agreements

When a taxpayer cannot pay the entire amount of tax debt, entering into an installment payment agreement with the IRS is one option. In Texas and across the nation, many taxpayers make use of these agreements to resolve delinquent tax liability.

It is also possible to enter into a Partial Payment Installment Agreement (PPIA). These are agreements used in cases where the IRS determines that a taxpayer has some ability to repay, but cannot pay the full amount of delinquent tax by the collection date set by statute.

But how well does the IRS actually do in monitoring the installment agreements with taxpayers that it enters into?

The answer, according to a new report, is not all that well for Partial Payment Installment Agreements (PPIA). According to the Treasury Inspector General for Tax Administration (TIGTA), the IRS sometimes fails to conduct a thorough analysis of a taxpayer's financial condition in cases where a PPIA is in place.

In theory, every two years the IRS is supposed to conduct a financial analysis of taxpayers with a PPIA. In practice, that does not always happen, the TIGTA report found. And in fact, some PPIAs were set up without appropriate checks in the first place.

The most common check is a complete financial analysis. In the absence of such an analysis, approval of a manager at the IRS is normally required in order to put a Partial Payment Installment Agreement in place.

The financial analysis that is required before a PPIA is not merely a hoop for taxpayers with delinquent taxes to jump through. It can help prevent taxpayers from entering into installment agreements that they may be unable to afford.

Source: Accounting Today, "IRS Needs Better Controls over Partial Payment Plans," Michael Cohn, June 12, 2013

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